Judge: Michelle Williams Court, Case: 22STCP01615, Date: 2022-09-12 Tentative Ruling

Case Number: 22STCP01615    Hearing Date: September 12, 2022    Dept: 74

22STCP01615            IN THE MATTER OF: CALIFORNIA TD SPECIALISTS

Hearing on Claims for Surplus Funds

TENTATIVE RULING:  Upon receipt of satisfactory evidence at the hearing of Pac Fin’s secured interest and Carolyn L. Harper, LLC’s recorded title ownership at the time of the trustee’s sale, the Court shall distribute the proceeds first to Pac Fin, LLC in the amount sufficient to “satisfy the outstanding balance of obligations secured by” the deed of trust, (Civ. Code § 2924k(a)(3), and then the remainder of the balance to Carolyn L. Harper, LLC. (Civ. Code, § 2924k(a)(4).)

Background

On April 29, 2022, Petitioner California TD Specialists filed a petition and declaration regarding unresolved claims and deposit of undistributed surplus proceeds of trustee’s sale noting real property located at 4155 South Hobart Boulevard, Los Angeles, California 90062 had been sold at a trustee’s sale on December 14, 2019 with a surplus of $227,510.22. After removing trustee fees and expenses as well as the filing fee for this petition, Petitioner deposited $223,150.22 with the Court.

On May 31, 2022, Keenan Brown, as special administrator of the Estate of Adolphus Williams filed a claim for surplus funds.

On June 3, 2022, Carolyn L. Harper, daughter of Adolphus Williams, filed a Notice of Intent to Claim a Portion of Surplus Funds of Foreclosure Sale.

On July 25, 2022, Keenan Brown, Special Administrator of the Estate of Adolphus Williams, filed an opposition to the motion, noting Pac Fin failed to provide proper notice of motion, there was no notice of deposit given, and no proof of consideration was provided for the purported lien held by Pac Fin.

On July 29, 2022, Pac Fin filed an opposition to Brown’s claim and reply to the opposition arguing Brown lacks standing to assert a claim to the funds, Pac Fin has priority, and whether or not notice of the deposit of funds or proof of consideration was given for the lien are irrelevant as to Pac Fin.

On August 5, 2022, the Court held a hearing on Pac Fin, LLC’s May 31, 2022 Notice of Motion, Hearing and Claim for Surplus Funds. The Court ordered the motion off-calendar and directed the clerk to provide notice of the instant hearing pursuant to Civil Code section 2924j(d).

On August 12, 2022, the Carolyn L. Harper, daughter of Adolphus Williams, filed a “Declaration and Proof of Claim for Surplus Funds.”

Request for Judicial Notice

On September 2, 2022, Pac Fin filed a request for judicial notice seeking judicial notice of two grant deeds related to the property recorded on October 2, 2020. The request is GRANTED. (Evid. Code § 452(c).)

Resolution of Claims to Surplus Funds

Standard

When a trustee’s sale is concluded and there are surplus funds, the trustee has 30 days from the execution of the trustee’s deed to send written notice to individuals with a recorded interest in the real property prior to the trustee’s sale. (Civ. Code § 2924j(a).) This allows those individuals to make a claim to the surplus funds. (Civ. Code § 2924j(a)(3).) Claimants have 30 days to make a claim. (Civ. Code §¿2924j(a)(4).) Once claims have been received, the trustee must exercise due diligence to determine the priority of the claims. (Civ. Code § 2924j(b).) If there is no dispute as to the priority, the trustee pays out the funds within 30 after the conclusion of the notice period. (Civ. Code § 2924j(b).) If the trustee fails to determine priority or there is a dispute, the trustee must deposit the funds with the court pursuant to Civil Code § 2924j(c).

“Within 90 days after deposit with the clerk, the court shall consider all claims filed at least 15 days before the date on which the hearing is scheduled by the court, the clerk shall serve written notice of the hearing by first-class mail on all claimants identified in the trustee's declaration at the addresses specified therein. Where the amount of the deposit is twenty-five thousand dollars ($25,000) or less, a proceeding pursuant to this section is a limited civil case. The court shall distribute the deposited funds to any and all claimants entitled thereto.” (Civ. Code § 2924j(d).)

The Court determines priority according to Civil Code § 2924k(a): (1) the costs and expenses incurred in the selling of the property, (2) payment of any obligations secured by the deed or mortgage, (3) to satisfy any outstanding obligations encumbering the property, and (4) to the vested owner at the record time of the trustee’s sale.

Discussion

The Court signed the Order Authorizing Petitioner to Deposit Surplus Proceeds of Trustee’s Sale with Clerk of the Court Pursuant to Civil Code section 2924j(c) on May 12, 2022. Petitioner deposited $223,150.22 with the Court on June 14, 2022.

In support of its May 31, 2022 claim, Pac Fin provided a Deed of Trust with Assignment of Rents dated March 20, 2020 and recorded on November 19, 2020 as instrument number 20201489277. (McNab Decl. Ex. A.) The Deed of Trust secured an $86,000.00 loan, listed Alero Mack, Administrator of the Adolphus William Estate, as the Trustor, Chicago Title Company as Trustee, and 1st Choice Financial Nationwide, Inc. as beneficiary. (Ibid.)

Pac Fin claims it holds a secured interest under this Deed of Trust. Pac Fin claims it is owed “Unpaid Principal Balance: $91,042.19; Default Interest Rate: 19%; Unpaid from: September 19, 2020; As of 31 May 2022, the total amount due: $120,472.51, plus $5,000.00 in fees and costs expended in collecting the funds. Additionally, after 31 May 2022, a daily interest charge of $47.39.” (McNab Decl. ¶ 5.) Pac Fin submitted a Declaration and Proof of Claim for Surplus Funds to the trustee. (Id. Ex. C.)

The initial Petition included a Trustee’s Sale Guarantee that expressly stated it is for information purposes only. (Pet. Attachment 5, Ex. A.) Schedule B to the Guarantee states the beneficial interest in the Deed of Trust recorded as instrument number 20201489277 was assigned to Pac Fin on November 19, 2020 as evidenced in recorded instrument number 20201489278. (Pet. Attachment 5, Schedule B, § 11.)

The Court also received a Claim for Surplus Funds Made by Keenan Brown as Special Administrator of the Estate of Adolphus Williams. The Estate is not a secured creditor and  the filed claim admits both the existence of the assignment to Pac Fin, (Brown Claim ¶ 26), and notes “it appears that Carolyn Harper, LLC, was the legal owner of the Property when it was sold on December 14, 2021.” (Id. ¶ 39.) The Trustee’s Sale Guarantee with Schedule A filed with the initial Petition provided “[a]ccording to the Public Records as of the Date of Guarantee, . . . Title to the estate or interest is vested in: Carolyn L. Harper, LLC.” (Pet. Attachment 5, Schedule A § 3(a).) Pursuant to Civil Code section 2924k(a)(4), the Court is required to distribute proceeds, after satisfying secured creditors, “[t]o the trustor or the trustor's successor in interest. In the event the property is sold or transferred to another, to the vested owner of record at the time of the trustee's sale.” Neither Brown nor the Estate are secured creditors or record owners of the property. Accordingly, the Court has no statutory basis to distribute funds in this proceeding to Keenan Brown, as Special Administrator of the Estate of Adolphus Williams.

Finally, the Court received a “Declaration and Proof of Claim for Surplus Funds” filed by Carolyn L. Harper, in her individual capacity as the daughter of Adolphus Williams. This declaration attaches the Declaration and Proof of Claim for Surplus Funds submitted to the Trustee, which merely stated she was the daughter of the decedent entitled to an “unknown” amount due. (Harper Claim Ex. 1.) This claim provides no basis for the Court to distribute any funds to Harper in her individual capacity under Civil Code section 2924k or 2924j as Harper is not a secured creditor or the title holder in her individual capacity.

Pac Fin provided the October 2, 2020 recorded deeds by which Alero Mack, Administrator of the Estate of Adolphus Williams, transferred the property to Carolyn Harper, an unmarried woman, and Carolyn Harper transferred the property to Carolyn L. Harper, LLC. (RJN Ex. A-B.) Accordingly, neither the estate nor Carolyn Harper, individually, have any statutory right to proceeds in this action. The Estate’s claims must be resolved in subsequent litigation. The Court cannot adjudicate them here.

The Court has not been provided a copy of the assignment. Pac Fin must bring a copy of  recorded instrument number 20201489278 to the hearing to enable the Court to confirm Pac Fin’s secured interest. Without such document, the Court cannot confirm Pac Fin’s entitlement any funds pursuant to Civil Code section 2924j. (See Cal-Western Reconveyance Corp. v. Reed (2007) 152 Cal.App.4th 1308, 1317 (“From the face of the statute, it is apparent that it authorizes distribution of proceeds only to satisfy secured obligations.”).)